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Halt on travel may wipe out tourism dependant nations: UNCTAD

Jul 02. 2020
Photo credit: freepik
Photo credit: freepik
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By The Nation

United Nations Conference on Trade and Development (UNCTAD) estimates that for every US$1 million a country loses in tourism revenue its national income can drop by up to $3 million and have a dramatic effect on local employment.

Globally, the tourism sector could lose at least $1.2 trillion or 1.5 per cent of the world’s GDP now that travel has come to a virtual standstill for nearly four months due to the Covid-19 pandemic, an UNCTAD report published on Wednesday (July 1) said.

In the report, UNCTAD warned that the loss could rise to $2.2 trillion or 2.8 per cent of the global GDP if the halt on tourism lasts for eight months, and as much as $3.3 trillion or 4.2 per cent of global GDP if travel is halted for 12 months.

Tourism is the backbone of many countries and a lifeline for millions around the world, having more than tripled in value from $490 billion to $1.6 trillion in the last two decades, according to the UN World Tourism Organisation (UNWTO). However, the Covid-19 pandemic has brought travel to a halt, causing severe economic consequences globally.

Prevailing lockdown measures in some countries, travel restrictions, reduction in consumers’ disposable income and low confidence levels could significantly slow down the sector’s recovery, UNCTAD said.

“These numbers are a clear reminder of something we often seem to forget: the economic importance of the sector and its role as a lifeline for millions of people all around the world,” said Pamela Coke-Hamilton, UNCTAD’s director of international trade.

“For many countries, like small island developing states, a collapse in tourism means a collapse in their development prospects. This is not something we can afford.”

Developing countries could suffer the steepest GDP losses and Jamaica and Thailand stan out in this, losing 11 per cent and 9 per cent of GDP in the most optimistic scenario. Other tourism hotspots like Kenya, Egypt and Malaysia could lose over 3 per cent of their GDP.

Even rich countries are also feeling the pinch. Many popular European and American destinations, including France, Greece, Italy, Portugal, Spain and the United States may lose billions of dollars due to the dramatic drop in international tourism, UNCTAD forecasts.

Changes in GDP: 15 most affected countries, moderate scenario

Impact on other sectors, jobs and wages

Tourism accounts for a significant share of the global GDP and more than half of many countries’ national income. The coronavirus-induced losses in tourism are having a knock-on effect on other sectors that supply goods and services to tourists, such as food, beverages and entertainment.

Hence, UNCTAD estimates that for every $1 million lost in international tourism revenue, a country’s national income may decline by between $2 million and $3 million.

The massive drop in tourist arrivals has also left a growing number of people unemployed or with less income.

UNCTAD estimates show that in the worst-affected countries, such as Thailand, Jamaica and Croatia, employment for unskilled workers could drop at double-digit rates even in the most moderate scenario. Meanwhile, in terms of wages for skilled workers, the steepest drops were seen in Thailand (12 per cent), Jamaica (11 per cent) and Croatia (9 per cent) in the most optimistic scenario.

The effects could be worse for women who are expected to be disproportionately affected by layoffs in tourism due to Covid-19, the report said.

Women are more likely to run tourism businesses and make up about 54 per cent of workers in the accommodation and food services sectors. Since many women in the sector work informally in low-skilled jobs, they are unlikely to have unemployment benefits or other safety nets.

“This is why women are particularly hard hit in this crisis. And this is why policies that help protect the sector also protect the economic empowerment that many of these women have long fought for," Coke-Hamilton said.

Recovery support needed

UNCTAD, meanwhile, is calling for stronger social protection in affected nations to prevent worse economic hardship for people and communities that depend on tourism.

It is urging governments to protect workers, and design subsidies to help workers move to new industries if their workplace is unlikely to recover.

Government should also help tourism companies facing the risk of bankruptcy, like hotels and airlines. One approach may be low-interest loans or grants, the report states.

UNCTAD is also calling on the international community to support access to funding for

the hardest-hit countries.

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